SolutionGrahamManufacturingCoGScase - Detailed Explanation:...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Detailed Explanation: Calculating 2008 CoGS for Graham Manufacturing Company Page 1 of 3 © We are dealing with a manufacturer. They sell ONLY finished goods. Also, they make these, not buy from some one (i.e. no "purchases + freight" of finished goods by a manufacturer!). Hence, we figure out CoGS in the following manner. The approach is a simple sequence of steps. S1: start with how much finished goods the manufacturer had on hand (i.e. BIFG.) This is given in the question to be $125,000 S2: Next, add to this the value of new finished goods (NFG) whose manufacturing was completed during the year by converting work in progress. This is NOT directly given in the question, but must be computed from the information given. S3: The sum of S1 and S2 gives you the total value of finished goods that could have been sold during the year (FGAS) S4: However, not all of these were sold. Some finished goods remained unsold at the end of the year and were in inventory (EIFG.) This is given in the question to be $175,000 and must be subtracted from S3, what could have been sold. Once you do this, you will end up with Cost of (finished) Goods Sold! Get it? Now, how do you figure out S2 i.e. new additions to finished goods during the year? Well,
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

SolutionGrahamManufacturingCoGScase - Detailed Explanation:...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online